This week could be interesting for the stock indexes. We’ve rallied up to the top of our 12 week extremely wide trading range. How wide? 1,300 points in the Dow, bordered by 10,400 and 11,700. 140 handles in the S&P bordered by 1080 on the bottom and 1220 on the top side.
In effect, you have program trading pushing these markets to their extremes; followed by them picking up the pieces of what’s left of individual speculative traders. The “disruptor programs” have been very effective and have are living up to their name.
What to do? 1)Play the extremes of the ranges 2) trade small 3) place wider stops and place your stops away from obvious targets.
This week Germany and France are going to have to agree on re-capitalization of French banks and all the rest of the PIGS. Portugal, Ireland, Greece, Spain potential domino melt down.
Does any one really think they will solve this problem this week? After kicking the can down the road for 2 years. What is so special about this week? I just don’t buy it. Politicians and bureaucrats act quickly and correctly? Seriously? On what planet?
In any event, With the indexes near the upper resistance of their 12 week trading range, I’d be inclined to sell rallies.
That is all.
CER